This invention relates to a systematic determination of an employee""s market value within different job families and levels of responsibility.
Wherever one person or organization hires one or more workers to perform certain tasks, one issue that must be addressed is the proper level of compensation for the employee(s). Where only one employee is hired, the employer is theoretically free to compensate the employee at an arbitrary level, consistent with applicable minimum wage laws and the presumed goal of the employer to survive and/or to make a reasonable profit. However, as soon as an employer employs two or more employees to perform different tasks, proper compensation of each employee relative to the other employee(s) becomes a central concern. Further, an employer with one or more employees will wish to compensate each employee at a market rate sufficient to retain each employee, but not so generously as to put the employer at a competitive disadvantage. An employee job family and job level of responsibility, as discussed in the following, are found to be highly correlated with an employee""s market rate.
What is needed is an automated system for determining a group of employees"" market value, based upon their job families and respective levels of responsibility. Preferably, the system should be flexible enough to work with arbitrarily few, or arbitrarily many, combinations of job families and levels of responsibility. Preferably, the system should allow automated data processing using a computer but should not require a supercomputer for the analysis or presentation of the results. Preferably, the system should perform its analysis reasonably quickly, should be expandable to analyze an arbitrary number of observations (market rates) and should be able to estimate or allow predication of market value for at least one combination not included in the observations.
These needs are met by the invention, which provides a system that receives an arbitrary number of observations (market rates) for different job families and levels of responsibility and returns an estimate of the appropriate market values within a specified labor market for any combination of job family and level of responsibility within the system. These market values can then be compared to the internal salaries of employees, and appropriate salary adjustments can be devised.
The observations (market rates) are classified into job families and levels of responsibility. For clarification purposes, levels of responsibility are divided into categories in this application, and each is referred to as category/level of responsibility, or simply C/L. An algorithm, believed to be nearly optimal, is applied to the observations to identify a market value estimate for each of a selected number of job families and C/Ls. The algorithm produces a factor for each job family and for each level of responsibility in the system. By multiplying the factor of the job family by the factor for the C/L, it is possible to estimate the market value for any combination of job family and C/L within the system.
Where a market rate for a specified job cannot be directly estimated, because the particular combination of that job family and C/L factor is not found among the market rates, the market value for the specified job family can be estimated indirectly, using the appropriate job family factor for a first job family and the appropriate C/L factor for a second job family, where the first and second job families are within the observations. Thus, an estimated market value can be xe2x80x9cfilled inxe2x80x9d where direct market rates are missing.